Weak British retail sales heap pressure on government

24th March 2011, Comments 0 comments

British retail sales fell more than expected in February, official data showed Thursday, heaping fresh pressure on the coalition government the day after it slashed its 2011 growth forecast.

Retail sales in Britain dropped 0.8 percent in February from January, when they had jumped 1.9 percent, the Office for National Statistics (ONS) said.

Analysts had forecast a slightly smaller drop of 0.7 percent in February, according to a poll by Dow Jones Newswires.

And they said the latest data dealt a blow to government hopes of kick-starting growth of Britain's economy, which shrank in the final quarter of 2010.

"Given that consumer spending accounts for some 65 percent of (British) GDP, any sustained weakening in spending would be very worrying for overall growth prospects," said Howard Archer, chief European economist at research group IHS Global Insight.

Charles Davis, an economist at the Centre for Economics and Business Research, added: "Overall, today's data underline that the UK consumer is unlikely to be in a position to provide much support to overall growth in the economy this year.

"The figures highlight how households are being forced to retrench in the face of a higher cost of living and continued weakness in earnings growth."

The data came a day after the Conservative-Liberal Democrat government slashed its 2011 forecast for British gross domestic product (GDP) growth to 1.7 percent from a previous estimate of 2.1 percent.

Finance minister George Osborne, who gave the downgrade in his annual budget to parliament Wednesday, blamed the sharp revision on the British economy's contraction in late 2010 and on rising commodity prices and inflation.

Retail sales meanwhile increased by 1.3 percent in February compared with 12 months earlier, the ONS added on Thursday. That compared with expectations for a rise of 2.1 percent.

© 2011 AFP

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